The past two years presented challenges within the healthcare industry that were not expected, and there isn’t a magic ingredient that will solve them. However, even if these challenges can’t be resolved, they can be managed, controlled and insured. Analyzing these challenges and trends for the healthcare industry will help you get ahead in managing risks as you plan for 2022.

The Rapidly Changing Business Environment

Top Business Challenges

It’s safe to say that the COVID-19 pandemic has been the top challenge facing healthcare companies the last few years. As the world enters the third year of the pandemic, the healthcare industry faces a variety of ongoing challenges. Shifts in delivery of care, labor shortages, cyberattacks, and value-based care reimbursements top the list of challenges on the rise in 2022.

“The top challenges for physicians in 2022 are anticipated to be recruitment/retention of staff; enhanced competition from insurance companies, pharmacies, grocery stores and other retail entities providing primary and virtual care; physician burnout as COVID enters its third year; coding and related changes with CMS documentation requirements; and addressing value-based contracting issues. Further, consolidation in the physician space either via mergers/acquisitions (e.g., infusion of private equity into practice management, independent practice mergers, hospital acquisitions, etc.) or through the full-employment model with hospitals/health systems (>50% of physicians now employed by same), has alleviated some of the capital requirements for growth and created enhanced leverage with payors. However, the overall level of administrative burden on physicians remains as a recent AMA (American Medical Association) survey revealed physicians are only able to spend 27% of their day providing patient care and the remaining time dealing with administrative duties.”

Labor Shortages

HealthLeaders reports that the industry has lost 20-30% of its workforce since 2019. Their studies have also shown that of the workers still employed, many are actively seeking new positions or considering leaving the healthcare field altogether. This aligns with everything we are seeing moving into 2022.

It is no surprise that healthcare organizations list acquiring and retaining talent as not only a top challenge, but also a top priority. Top strategies for acquiring and retaining talent include flexibility in work arrangements followed by increased compensation. Much of 2021 was focused on getting human capital plans right. As we move forward, business owners and leaders should think about which positions are best suited to continue working remotely and how to provide more flexibility to team members who must work on site.

Strategies for Acquiring and/or Retaining Talent

“Individuals are more apt to seriously consider a job change if they feel they are not appreciated, not seeing the growth they desire or simply aren’t enjoying their position/work environment due to burnout. Today, it is becoming increasingly important for companies to focus on being as proactive as possible in retaining top performers. Some top employees are contemplating leaving for better offers or more fulfilling challenges, making the proactive role of management and human resources more vital.”


Regardless of size, every healthcare entity is at risk for cyberattack, and cybercrimes targeting the industry will only get worse in 2022. According to TechTarget, the rising threat of cyberattacks, such as ransomware, has led to cyber insurance needs changing and becoming more expensive. Their research reports premiums on cyber insurance policy renewals are rising by nearly 50%, but that statistic only applies to companies eligible to renew their policies. Organizations that have made cyber-related claims in the past may not be able to renew their cyber coverage at all.

At LBMC, we are seeing companies plan to leverage improved endpoint detection capabilities, multi-factor authentication, regular employee training and third-party vendor security audits to protect against cybercrimes in 2022. These steps will be necessary to ensure continuity of operations and patient care, and providers will likely be required to implement these measures in order to be eligible for cyber insurance.

Value-Based Care Reimbursement

The U.S. Department of Health and Human Services Center for Medicare and Medicaid Services (CMS) is continuing its strategy to assist providers in the transition to value-based care reimbursement models for Medicare Patient Populations. Physicians and health systems will be faced with increasing pressure to participate in Medicare “Alternative Payment Models” and “Hospital Value-Based Purchasing Programs.” Proactive providers and health systems will now embrace this shift by choosing the right advisory services partner in securing additional value-based reimbursement before having to succumb to future loss of fee-for-service revenue.

Growth Opportunities and Optimism

To offset labor shortages, healthcare providers will increasingly leverage automation in 2022. Forbes shared insights on how healthcare providers are using automation to help provide better patient experience with staffing shortages. They reported that automating processes and introducing new innovative technologies will help with clinician burnout, save time for patients and staff, and reduce workloads of care teams. Technology will also play a big role in remote patient management (RPM) and improving the overall patient experience.

According to a report by Linchpin SEO, the healthcare industry is estimated to bring in $8.73 trillion in revenue by 2022, up from $7.08 trillion in 2015. As the healthcare industry continues to grow, understanding the latest digital trends and key business topics can help businesses allocate resources, elevate patient care, and develop a strategy to adapt to the higher demand for services and support.

Business Performance/ Strategies

Sales & Profitability Strategies

Last year, 63.2% of healthcare companies were primarily focused on increasing profitability by improving productivity and efficiency, and 46.1% were looking at decreasing operating expenses.

Our healthcare analytics expert, Brad Milner, suggests that healthcare organizations could see an immediate benefit in FTE productivity by implementing data acquisition and engineering. Pulling together large and disparate types of data from multiple sources into an organized format, so that non-technical clinicians and hospital executives can utilize the information in decision making can have an immediate and significant impact on overall FTEs and their ability to focus on the more important tasks.

Strategies for Increasing Profitability During 2021

“Strategic procurement is an effective way to decrease operating expenses and increase profitability. New procurement solution models are available that pay for themselves and provide quick, measurable wins. These models can offer options ranging from fractional resources that are applied based on an organization’s budget and resources, to serving as an organization’s long-term procurement partner by helping with sourcing, request-for-proposal documents, contract management, auditing services, negotiating with suppliers and more.”

Capital Spending

We continue to see healthcare companies prioritizing acquiring new locations and/or facilities at 46.8% with technology solutions following at 34%. However, there was a larger discrepancy between high growth businesses and no growth businesses. High growth businesses were focused on marketing at 60.9% versus only 21.2% for no growth businesses. This difference is also apparent with acquiring locations, which shows 60.9% of high growth versus 39.4% of no growth.

High growth healthcare companies put a higher priority on maintaining their brand awareness and visibility in their current market, which we are seeing with high growth organizations across all industries. Telehealth remains a strong trend and provides an opportunity to improve the clinician experience. According to a McKinsey report, telehealth use is 38 times higher than before the pandemic started and is predicted to account for 20%, or $250 billion, of U.S. healthcare spending. Similarly, with more virtual care and digital health options available, a greater focus on cybersecurity is also common among high growth organizations and is a key topic in healthcare this year.

Areas in Which Increased Capital Spend is Anticipated—High Growth vs. No Growth

Mergers & Acquisitions

Healthcare organizations expecting minimal to no growth have a stronger consideration for M&A. Some may see a merger or acquisition as a way to accelerate their revenue growth in 2022. At LBMC, we
are seeing that robust healthcare deal making reflects continued transformation in the industry. In Q3 alone, 588 deals closed totaling $148 billion. Middle Tennessee is a hot market for healthcare, and healthcare IT is particularly taking off.

According to Kaufman Hall’s Q3 2021 mergers and acquisitions quarterly activity report, there were a “lower total number of transactions compared with pre-pandemic historical activity, but a notably high level of total transacted revenue and average seller size by revenue, driven in part by regional health system partnerships and divestitures of hospitals outside of core regional markets.” These trends align with what we are seeing with our clients day-to-day in this space.

While healthcare IT companies are taking advantage of the increased demand for multifunctional additional platforms, providers are trying to keep pace with advances in care coordination and Electronic Health Records (EHR) interoperability. Mental health providers – from addiction recovery facilities to autism therapy centers – are commanding high multiples, as patients, clinicians and payers are increasingly recognizing the importance of holistic care.

Hospitals are still staggering under the financial strain of COVID-19, leading to ongoing defensive consolidations, but offensive consolidations are the largest plays in the industry right now. Aimed at diversifying product lines and planning for future revenue streams, these are focused on add-ons to try to diversify or build the bottom line. The goal is to come out on top when they go to market in three to five years.

The shift towards value-based care in part is a result of several adjustments to CMS regulations and other policies from the federal government. Companies that are being acquired are often care coordination or data analytics organizations to support that value-based care.

LBMC has seen successful attempts at deeper regulatory and compliance diligence, including provider billing and coding due diligence earlier in the deal process and sometimes prior to the finalization of the LOI – admittedly not in all cases. Significant compliance and regulatory exposures are difficult to overcome in a transaction and discovering those issues earlier in a deal process will likely provide for more thoughtful legal and financial considerations, lessening the risk of a dead deal.

Healthcare M&A Activity
Healthcare M&A Activity
* As of September 30, 2021
Source: Pitchbook, page 16

Key Business Topics


Cybersecurity is a key priority for most healthcare organizations moving into 2022. Of those organizations that are prioritizing cybersecurity, nearly 80% plan to conduct a cybersecurity risk assessment, and 65% plan to implement IT assurance and compliance. According to our security leader, Mark Burnette, high growth companies are prioritizing cybersecurity more so than no growth because it is a prerequisite for doing business today. Most companies require a certain cybersecurity posture of their business partners, and as such, companies that plan to grow will be expected to implement, assess, and maintain a robust cybersecurity program to appease their business partners and their board, as well as meet their regulatory obligations.

Cybersecurity issues have been a pain point for the industry for quite some time, and unless entities continue to focus on addressing cybersecurity challenges, there is no reason to expect that the cybersecurity situation will improve. Unfortunately, the volume and sophistication of cyberattacks has only increased, making it more difficult to stay ahead of the next big cyber threat. Therefore, now is not the time to divert attention away from important cybersecurity and data protection initiatives. Hopefully, all healthcare organizations will be able to find a way to properly assess, measure, and manage their cybersecurity risks in 2022. If not, the industry may be in for another long year.

Cybersecurity Strategies/Actions for the Upcoming YearCybersecurity Strategies/Actions for the Upcoming Year

Provider Relief Funds

For healthcare providers, navigating the terms and conditions surrounding the Provider Relief Fund (PFR), completing the required submissions, and gathering evidence to support a compliance audit
is uncharted territory. There are more than $186 billion in payments to be distributed through the PFR. On Dec. 14, the U.S. Department of Health and Human Services (HHS) through the Health Resources
& Services Administration (HRSA) announced the distribution of approximately $9 billion in Provider Relief Fund Phase 4 payments to healthcare providers and as of Dec. 30, 2021, approximately $120 billion in payments had been distributed. The visual represents the list of providers that received a payment through the PRF and who have attested to receiving one or more payments and agree to the terms and conditions.

Eligible healthcare providers may use funds to prevent, prepare for and respond to coronavirus, and for related expenses and lost revenues attributed to coronavirus. Funding cannot be used where another source has reimbursed or is obligated to reimburse those expenses or losses. Noncompliance with terms and conditions could result in recoupment of some or all of PRF payments.

Documentation is an essential piece of the Provider Relief Fund process. Because there are gray areas, documenting why certain expenses were included and the methodology behind lost revenue is vital. As organizations head into 2022, they need to think about whether the expense was incurred to prevent, prepare for or respond to coronavirus and whether it was an incremental cost incurred.

U.S. Map of Provider Relief Fund Payments
U.S. Map of Provider Relief Fund Payments


It’s no surprise that the pandemic continues to be the most significant challenge facing healthcare companies today. Specifically, the labor shortage resulting from the pandemic continues to squeeze healthcare organizations as they strive to take care of patients and team members alike. However, value-based care, automation and M&A other opportunities begin to paint a brighter picture in 2022 and beyond.